Which Debt Ratio Would Indicate the BEST Overall Ability of an Organization

question 58

Multiple Choice

Which debt ratio would indicate the BEST overall ability of an organization to pay its debts?

• A) 25%
• B) 40%
• C) 60%
• D) 130%

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Definitions:

Receivables Financing

A type of financing in which a company uses its accounts receivable as collateral to secure a loan.

Terms of Sale

The conditions under which a seller will complete a sale, typically covering payment terms, delivery times, and warranties.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Credit Extension

The act of lending additional credit to borrowers or the period for which the credit is extended.